Capital markets regulator SEBI has passed an interim order against Varanium Cloud, a company listed on NSE’s SME platform, banning the company and its managing director from accessing the securities market until further notice. The latter has been restrained from acting as a director or key managerial personnel of any listed company or its subsidiary.

The order observed that the money raised through the IPO and a subsequent rights issue was not used for the intended purpose mentioned in the offer document. Instead, the promoter shifted part of the IPO funds to an entity, BM Traders, and the end use of such funds is not known.

The financial statements of Varanium are shrouded in questionable transactions, with most of the sales and purchase transactions mere ledger or book entries. The misstated financial statements had presented a rosy picture about the financial health of the company, leading to increase in investors’ interest in the stock, the order said.

The company’s public shareholders rose from around 1,000 in September 2022 to more than 10,000 in December 2023, while its share price rose significantly. The company’s Managing Director Harshawardhan Hanmant Sabale, taking advantage of such price rise, off-loaded shares and made gains of over ₹122 crore.

After hitting an all-time high of ₹239.9 in October last year against the IPO price of ₹122, the NSE-SME listed stock went on a downward spiral early this year. Trading has since been suspended.

The Bombay High Court has issued a non-bailable warrant against Sabale, with “Red Corner Notice proceedings” for defaulting on payment of more than ₹49.53 crore to his creditors, according to reports.